Dear Fellows

img_2405
I am writing theses lines on my phone during my flight to D.C. for the ECI Fellows meeting.

If you are not a member of ECI, I highly recommend you join. The group comprises some of the most thoughtful individuals in the E&C sphere. These individuals care deeply about our field and seek always to advance it by conducting meaningful research. If the ECI didn’t exist, we’d have to invent it.

Over the next two days, we’ll be discussing how best to incentivize ethical behavior. We have a fantastic lineup of thought leaders, including Primed to Perform author Neel Doshi. I’m delighted that I, and nearly 200 of my E&C colleagues, will get to learn from Neel how to transform our organizations using the new science of total motivation. If you haven’t read Neel’s book, grab a copy now.

Tomorrow I’ll report on our first day. See you then.

Book report: Primed to Perform – Performance calibration and Igniting a movement

51B5yNM51AL._SY344_BO1,204,203,200_

Book by Neel Doshi & Lindsay McGregor

Reading notes by Yan Tougas

Performance calibration

Organizations need both tactical and adaptive performance, in the right balance.

Performance management systems usually disrupt the balance.

Ninety percent of HR executives believe that their performance management systems yield inaccurate results. That said, the absence of an evaluation system also leads to lower ToMo. Absent a formal process, assignments and promotions appear to be based on favoritism. Lack of transparency creates new forms of emotional and economic pressure.

One of the worse systems is stack ranking. It shifts motives from play and purpose to emotional pressure and economic pressure. Employees focus on what will keep them away from the bottom rather than what’s good for the company. They will reject the addition of star players to their team for fear that it will push them down on the ratings. Managers keep low performers on their team to protect high performers. Unfair review processes reduce ToMo by 33 points.

We are biased to evaluate behavior based on its outcome, not the input, even if the outcome was driven by luck. This outcome bias ensures that most performance reviews don’t do anything to improve performance. You have to think about how someone will perform going forward, not just depend on past results.

Most performance review systems prioritize tactical performance. By balancing reviews with adaptive performance measures, ToMo goes up by 28 points (which means adaptive performance will go up as well).

Unlike natural ecosystems that eventually achieve equilibrium, business culture never do. There are too many changes to the environment and too many shocks to the system. Performance calibration is what keeps the balance.

First and foremost, performance calibration must manager the career ladders.

Second, performance calibration must manage the connections between the bottom-up adaptive goals set as part of the daily rhythm and the tactical goals being communicated to parties outside of their society.

Performance calibration is positive in its intent, not punitive.

Igniting a movement

The process by which you build or rebuild your culture must itself be high ToMo. You have to lead change in ways that create play, purpose, and potential, not pressure. Fear and pressure do not make for adaptive people. We must create conditions within which other will motivate themselves. It’s never too late to change.

To build or rebuild a culture you need to create the ultimate form of human adaptability: a social movement. There are six necessary conditions for collective action to form:

Relaxed control. The dominant authority must not be willing or able to prevent collective action.

Common belief. People must share a common view of the problem and a common perspective on the solution.

Strain. People must emotionally feel the difference between their current state and their desired future state.

Conduciveness. People must have the ability to interact with one another to enable collective action.

The spark. Some kind of catalyst to trigger action.

Mobilization. Processes mobilize people within the system to act collectively, while still enabling individuality and adaptability.

To get started:

Join the community. @NeelVF @McGregorLE www.primedtoperform.com

Measure your ToMo or your team’s. http://www.vegafactor.com/survey/

Teach these concepts to your leaders.

Understand how much you are spending in time and money on culture. You can often build your culture without spending any additional money.

 

To follow  my implementation journey, follow me on Medium.

Book report: Primed to Perform – The fire watchers

51B5yNM51AL._SY344_BO1,204,203,200_

Book by Neel Doshi & Lindsay McGregor

Reading notes by Yan Tougas

Fire watchers were those cave dwellers who were charged with ensuring that the fire kept burning, back when no one knew how to make fire.  They had the most important job in the clan.

In organizations with high ToMo, the last thing you want is lose the culture.  You need people whose responsibility is to keep the culture (fire) alive (burning). HR departments are almost never perceived to be the custodians of adaptive performance.  Most organization don’t have all the keys to culture.  When they have one or more keys, they are owned by different people who don’t coordinate their efforts.  There are no fire watchers to keep the culture burning hot.

The job of a fire watcher can be broken down along six dimensions:

The mandate. The focus of the fire watchers is to build a culture and a system for continuously improving adaptive performance in every role in the organization.  They must study how their organization benefits from adaptive performance and learn where VUCA (1) threatens the overall strategy or (2) creates a competitive opportunity.

Adaptive performance metrics. Use the ToMo factor.

Budget and ROI.

Spending roughly 1% of your total compensation expenses on ToMo could hire 1 fire watcher for each “village” (see chapter 13).

Spending 2% to 5% of total compensation could create career paths, leadership training, tools, and more to support a high-ToMo system. Often, this is not additional spending, rather part of existing programs for leadership training, process improvement, etc.

With controlled experiments, we can quantify the dollar value of each point of ToMo gained.

The team.

Fire watchers should be led by a chief culture officer reporting to the CEO.

Team comprises core members and rotational members.

Core members include HR and other functions that hold culture keys.

Rotational members include natural ToMo leaders from every major job category.  Two-year stint.  Successful rotation should be part of the career ladder.

Collectively, the team should have ownership of all the keys to culture. This solves the coordination challenge.

For the fire watcher manifesto, click here.

Apprenticeship and skill building. Culture officers must be given the training and support they need to learn these skills.

Habits. Constant optimization requires a process.

Building a culture requires more than checking boxes.  You need to use all the keys properly.  The keys are not additive but synergistic: 1 + 1 = 5.  For example, on a scale of -100 to +100, having a confident at work can increase the ToMo factor by 3.  Having the ability to experiment can increase it by 16.  Having both increases it by 46.  That is significant.

Book report: Primed to Perform – The Hunting Party

51B5yNM51AL._SY344_BO1,204,203,200_

Book by Neel Doshi & Lindsay McGregor

Reading notes by Yan Tougas

Traditional companies break their workforce into smaller groups in order to give managers and supervisors “control” over their team.  One goal of a supervisor is to detect and eliminate free riders.  But what if instead you focused on creating teams that increase ToMo?

There are two types of communities that have high adaptability: marketplaces and societies.  It turns out that creating marketplaces in our organizations is not viable for four (4) reasons:

  1. Organizations need citizenship to scale adaptive behavior.
  2. Cooperation and consistency among players in the organization is needed.
  3. Organizations need participants to improve shared resources.
  4. Organizations carry the cost of cobra effects.

These attributes are not necessary in a marketplace.  Organizations must use the society model, explained below.

In the primate world, the size of a community is directly proportional to the size of the primate’s brain’s neocortex.  For humans, the maximum size of a social group appears to be around 150.  Research has shown that building a community is mentally taxing.  We must interact meaningfully with a person every four months to maintain a bond.  These meaningful interactions require a minimum of time investment, limiting how many people we can carry in our social networks.  The closer someone is to us, the more time we must invest in the relationship.  The human social network can be broken down as follows, and companies should consider creating groups of similar sizes:

150 people form a village.  Simply knowing that they belong to a group increases people’s resilience.  Some companies build groups that are too large.  Keep it to 100-200 people and give them an opportunity to connect for a few minutes every month.  Groups that are too large develop an “us-versus-them” mentality, where some inside the group believe they are no longer connected to the group.

50 people form a band.  They are more deeply connected, feel a greater sense of safety, willing to share knowledge and resources, and protect one another.  At this size, you can scale up the sense of play.  Groups of that size can form around a topic, specific objective, geography, etc.

15 people form a hunting party.  They work closely together toward specific common goals.  Real work should be managed by the smallest teams possible.  Bonding leads to high performance and high performance to bonding.  These people should be allowed to connect for at least 30 minutes/week.  They should be encouraged to adopt the “waterline principle”: it’s OK to punch a hole in the boat as long as it is above the waterline.

5 people form a confidant group.  This is the level of deepest trust, where adaptive performance can be the highest.  These teams are leaderless.  The best way to form these teams is to create a mentorship program for every new hire in the organization.

In most companies, only confidants are organized as a society.  Other groups operate as a marketplace.  Further, the company is likely to treat its customers, suppliers, and competitors using a marketplace model.  Truly, the only people our employees should be competing against are the organization’s competitors.

Book report: Primed to Perform – Compensationism

51B5yNM51AL._SY344_BO1,204,203,200_

Book by Neel Doshi & Lindsay McGregor

Reading notes by Yan Tougas

Compensation is the most misunderstood key to culture.  Too many managers believe that performance-based pay is the key to motivation.  The reality is that this is true only in some cases.  If the compensation threatens adaptive performance and cooperation, the whole company can suffer.  A better compensation system rewards people for learning new skills.

Money is a poor motivator but it can be an effective “activator”, overcoming one’s inertia, convincing someone to leave his/her current job for a better one.  At the same time, performance-based rewards tend to cancel out the natural sense of play.  People hesitate to experiment because failure means less money.  Performance reviews linked to compensation create a blame-oriented culture.  It’s better to focus on learning skills and mitigating weaknesses.
Below are nine questions to help you determine if performance-based compensation is good for your organization.  The more times you answer no, the more damaging it can be to your business:
Are adaptive behaviors important?
1. Is the job routine, with very little VUCA?
2. Do your people face no conflicts of interest?
3. Is your company insulated from the financial and reputational risks that come from an individual’s distraction, cancellation, and cobra effects?
4. Is teamwork unimportant to drive the highest levels of performance?
Will your compensation system reduce total motivation?
5. Can you fairly measure important behaviors, especially adaptive behaviors?
6. Can you determine the value of the behaviors you care about?
7. Are your people resistant to emotional pressure, economic pressure, and inertia?
8. Is ToMo naturally high in your company?
9. Is it easy to align incentives between your customers, your employees, and your company?
If you answer no too many times, you may find that an investment in culture building yields higher performance dividends than pay-for-performance.

Book report: Primed to Perform – The Land of a Thousand Ladders

51B5yNM51AL._SY344_BO1,204,203,200_

Book by Neel Doshi & Lindsay McGregor

Reading notes by Yan Tougas

Who are your people fighting against?  Your competition, or each other?  Your culture drives their choice.

Competitive career ladders make us spend our time thinking about how to get promoted instead of how to do great work.  Related studies have shown that when the competitive pressure increases, people choose to work harder, not smarter.  They take fewer risks.  They engage in busy work.  Worse, those who are best at solving problems are more likely to avoid taking intellectual risks.  They prioritize tactical over adaptive performance.  Instead of doing the work for play, purpose, or potential, they are doing the work for a big reward (economic pressure) or to avoid feeling like losers (emotional pressure).

Instead of having only one corporate ladder for everyone to climb on, high-performing organizations give each person an individualized career ladder.  When creating ladders, keep these four guiding principles in mind:

Bring your own ladder.  Not everyone wants to rise through management ranks.  Most teachers like the classroom and do not want to become principals – but they do want to influence more than 30 kids/year.  Most engineers like creating and do not want to manager other engineers – but many want bigger labs and research assistants.  High-performing organizations create ladders for these people.

The military has its “warrant officers”.  Academia has its “fellows”.  These ladders cater to people who value knowledge over management.  Managers know they can turn to them for expert, candid advice.  These are not “yes men”.

To increase ToMo, we must allow employees to design their own career ladders.  Each rung must help employees grow in a meaningful way, while also adding value to the company.  There are three basic templates for ladders:

Managerial ladder.  Managerial promotions should be pursued by those who find play in learning how to manage and coach.  These promotions should not be a reward given to the top performers, lest you promote someone until she is no longer good at her job (the Peter Principle)

The expert ladder.  For employees who should be mastering a technical skill or other area of knowledge required for the success of their company.  At each rung, people should have more opportunities to expand their expertise, to learn more, along with an obligation to share their knowledge

The customer ladder.  These employees should be mastering the science and art of working with customers.

Aspiration points.  Each ladder must be worth climbing.  The top of the ladder is called the aspiration point.  For the managerial ladder, the aspiration point is often the CEO (or the CFO, or GC, if you are in the finance or legal track).

IBM created Fellows for its top scientists.  Instead of promoting them out of the lab, Fellows are rewarded with bigger playgrounds.  Fellows don’t compete with their colleagues to become Fellows.  Each pursue their own field of research.  They all have their own ladder.

Define the rungs.  Crisply define the skills and values required for each step up.  This enables people to know where they stand and that the need to learn (not necessarily do) to progress.  Adjust their compensation as they climb each rung.  Everyone learns-to-earn.  The evaluation is based on values and behaviors, not just outcomes like revenues.  Each rung must create more organizational value than the previous rung.  Teaching others what was learned between rungs is a must.

Reward with ToMo.  Beyond compensation, reward those who climb the ladder with increased opportunities for play, purpose, and potential.  Bigger educational or travel budgets, ability to go to conferences, learn new skills, showcase their work internally and externally, liberty to take on more risks.

Book report: Primed to Perform – The Playground

51B5yNM51AL._SY344_BO1,204,203,200_

Book by Neel Doshi & Lindsay McGregor

Reading notes by Yan Tougas

The most powerful source of total motivation is the design of a person’s role within an organization.

Unfortunately, most jobs are designed around tactical performance.  We start with a goal, we create a process to reach this goal, and we write a job description to execute that process – with no room for adaptive performance.  While this may work well for a computer program, people aren’t machines.

Designing a job around tactical performance plays into the blame bias, i.e. it assumes that people are the problem.  While this may be true in some cases, we can’t know for sure until we have made an effort to increase the positive motivators and decrease the negative ones within the job.

Designing a role that supports adaptive performance is not easy but the process is the same for all roles:

Impact.  Your job must (1) enable you to understand how your work creates an impact and (2) give you the ability to continuously improve.  You should see, clearly, what part of your job requires tactical performance and where adaptive performance is required.  It’s in the adaptive part that you can play, address VUCA, and find purpose and potential.

Inspiration.  Your role must be designed to inspire curiosity, to encourage you to come up with ideas to improve performance.

Prioritization and planning.  This is not simply about what must be done now versus later.  It’s also about identifying what ideas can be tested quickly (hares) versus the ones that require broad consensus before they are tried (tortoises).  Good role design identifies the hare pen and seeks to increase its population.

Performing.  Well-crafted roles should have a place where it is OK to experiment and learn (read “play”).  Organizations spend far too much time telling employees what they can’t do.  The best place to build a playground is where VUCA is greatest.

Reflection.  To see your impact you must have time to reflect on your work and its outcomes.  Every job cycle must include reflection time, and the cycle should be as short as practical.